 “The term financial statements as used in modern business, refers to the two statements which the accountant prepares at the end of a period of time.

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Presentation transcript:

 “The term financial statements as used in modern business, refers to the two statements which the accountant prepares at the end of a period of time for a business enterprise. They are the balance sheet, or a statement of financial position and the income statement, or profit and loss statement.”

 Income Statement  Balance Sheet  Statement of Retained Earnings  Statement of changes in financial position

 “The statement of profit and loss is the condensed and classified record of the gains and losses causing changes in the owner’s interest in the business for a period of time.”

 Manufacturing account  Trading account  Profit and Loss account  Profit and Loss Appropriation account

“The balance Sheet is, thus, a detailed form of the fundamental, or structural equation, it sets forth the financial structure of an enterprise. It states the nature and amount of each of various assets, of each liabilities and of the proprietary interest of the owners.”

Assets=Liabilities+Paid up capital +revenue -Expenses

 Recorded Facts  Accounting Conventions  Personal Judgements

 Relevant to Purpose  Complete and Accurate Information  Comparability  Facilitating Analysis  Simplicity  Right Time  Compliance with Legal Requirements

 Incomplete and Inexact Information  Qualitative Informations are ignored  Historical Information  Based on accounting concepts and conventions  Influenced by persona judgements  Being Incomparable  Static Statement  Value of Human Resources Not being Fully Disclosed

 Financial Statement Analysis is largely a study of relationships among the various financial factors in a business, as disclosed by a single set of statements and a study of the trends of these factors, as shown by a series of statements.”

 Determining objectives of Analysis  Rearrangements of Facts  Approximation of Figures  Comparison  Study of Trends  To Draw Conclusions  Reporting

Types On the basis of material used On the basis of process External analysis Internal anallysis Horizontal analysis Vertical analysis

 For management  For creditors  For investors  For labour  For the Government  For the Public